The persistently soft conditions in the aerospace insurance market continue, with little sign of change in the short to medium term. The aviation sector is on course to deliver a second year of exceptionally low claims.

Volatility continues to be limited in the aerospace insurance market, with prices staying fairly close to parity as a result of the low level of claims in the aviation industry generally as well as healthy competition among insurers.

The cost of lead premium in the aerospace insurance market continues to decline slightly, with average year on year reductions of 2%. Individual sub-sectors continue to follow the patterns laid down in during the first few months of the year.

The recent airline losses are changing the dynamics of the aerospace insurance markets, however. The reductions in the cost of insurance that are being seen in the airport and air traffic control sub-sector are increasingly a reflection of falling passenger numbers and aircraft movement forecasts, whereas last year the reductions were the result of generally lower risk perceptions for the aviation industry.

The newsletter breaks down aerospace activity into the three major sectors, manufacturer, airport and maintenance, repair and overhaul, and suggests the impact of the changing economic conditions on each.

We take a look at Aon's newly released Political Risk Map, which highlights the transformation of the economic situation into a potential political situation.

We also look at the general trends in the market and offer some very preliminary forecasts for where the aerospace insurance market could be at the end of the year and outline Aon's Terrorism Risk Management service.